Question

1. In Macroland, 500,000 of the 1 million people in the country are employed. Average labor productivity in Macroland is $15,000 per worker. Real GDP per person in Macroland totals:

2. Suppose Tulane University purchases a new desk that was produced in the U.S. for use in the Economics Department office. Everything else held constant, this will cause the ________ component of U.S. GDP to increase.

3. If the annual real interest rate on a 10-year inflation-protected bond equals 1.7 percent and the annual nominal rate of return on a 10-year bond without inflation protection is 3.2 percent, what average rate of inflation over the ten years would make holders of inflation-protected bonds and holders of bonds without inflation protection equally well off?

4. True or false: An open market purchase is expansionary monetary policy.

Answer 1

1. Average labor productivity = Real GDP / no. Of labors

Or, Real GDP = average labor productivity * no. Of labors

Or, Real GDP = $15,000 * 500,000 = $7500 million

Real GDP per capita = real GDP/total population = $7500 million / 1 million = $7500

Answer: $7500

2. If the university purchases a new desk that was produced in the U.S for use in the economics department office, then it can be considered as a government entity. Everything else held constant, this purchase will cause the government spending component of US GDP to increase.